Turkish-Iranian tycoon Reza Zarrab pleads guilty, set to testify

Prosecutors on Tuesday said that a wealthy Turkish-Iranian gold trader struck a plea deal to testify about a vast corruption scheme they say reached into the upper levels of the Turkish government - a development that could further strain relations between the United States and one of its key strategic allies.

The revelation came Tuesday as a defence lawyer asked for a two-week delay of the New York City trial of Mehmet Hakan Atilla, deputy CEO of Halkbank, saying he needed time to prepare for Reza Zarrab's testimony. Defense lawyer Robert Fettweis said prosecutors recently released 10,000 pages of evidence related to Zarrab, including emails.

U.S. District Judge Richard Berman rejected a postponement, saying lawyers should have known for months that Zarrab would testify.

Zarrab will take the witness stand to detail how he and Mehmet Hakan Atilla laundered Iranian oil money in violation of U.S. economic sanctions against Iran, a conspiracy involving bribes and kickbacks to high-level officials, Assistant U.S. Attorney David Denton said in opening statements at Atilla's trial.

Assistant U.S. Attorney Sidhardha Kamaraju said Zarrab, would take the stand Wednesday.

Turkish President Recep Tayyip Erdoğan and his AKP government call the case political motivated.

Nine people have been criminally charged, but only Zarrab and a banker from Turkey's Halkbank, Mehmet Hakan Atilla, are in U.S. custody. Former Turkish Economy Minister Zafer Cağlayan is also among the nine defendants indicted in the case.

Zarrab was arrested by U.S. authorities in Miami in March 2016 on charges of helping Iran process millions of dollars of transactions when it was under U.S. sanctions for its nuclear program. The case threatens to reopen a case that reached right into Erdoğan’s inner circle. It will also deepen existing tensions between Turkey and the United States. Zarrab was detained and charged in İstanbul in 2013 in a huge corruption case. All charges against Zarrab and those linked to Erdoğan's government were dropped.

The U.S. case was built on work initially performed by pro-Fethullah Gülen Turkish investigators who targeted Erdoğan over gold trader Zarrab in 2013 in a sweeping corruption scandal that allegedly led to Turkish government officials. The evidence of the case, leaked tapes, elicited by the network of the Gülen, which had been organised in the police, judiciary, military and the other states institutions. Gülen had been a close ally of the then-Prime Minister Recep Tayyip Erdoğan, helping him to redesign and install his Islamic-rooted Justice and Development Party (AKP) in power in 2002. But his alliance with the AKP has faltered in recent years, especially in 2013 when police detained dozens of Erdoğan's key business and political allies over bribery allegations.